The Finance and Leasing Association (FLA) director general has called the decision to allow credit customers to defer payments for up to six months ‘dangerous’.
Yesterday, the Financial Conduct Authority came out with more details following its holding statement that ‘consumer credit customers who have not yet had a payment deferral under our July guidance can request one’.
It has said that consumer credit customers who have not taken payment deferral yet under its July guidance can request one for up to six months and those who are already have a payment deferral can apply for a second one.
Stephen Haddrill, FLA director general, commented that this gives borrowers the idea that a six-month deferral is always right and potentially leaves unsustainable debts.
He has called for the FCA to limit this guidance to three months, and suggested that if it won’t them furlough should also be extended beyond November.
He said: ‘Lenders are committed to supporting customers in financial difficulty and it is vital that this support is provided in a way that best serves their borrowers’ interests.
‘This is best achieved under existing FCA rules that require lenders to assess their customer’s position carefully.
‘Giving borrowers the impression that a six-month deferral is always the right answer is dangerous. It could leave people with unsustainable debts that they may struggle to repay.’
He added that new payment deferrals with a limited of three months with an option to review before there is any extension would give lenders a better chance to assess customers properly.
Haddrill said: ‘The FCA should limit its guidance on payment deferrals to three months at this stage as it did in March, so that there can be a full review of the policy by the FCA, and of individual circumstances by lenders before any extension.
‘Without this, some people will continue deferring payments and accruing debt to their extreme detriment.
‘If HM Treasury and FCA press ahead with a deferrals policy until the end of March 2021 in spite of these risks, then furlough should also be extended well beyond one month to give more people a realistic chance of being able to better manage their repayments in the interim.’
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